Introduction to Debt Relief via an IVA
An Individual Voluntary Arrangement (IVA) is a formal, legally-binding agreement between an individual and their creditors to repay debts over a set period. It’s a popular debt relief option in the UK, designed to help people regain control of their finances without declaring bankruptcy.
An IVA is typically arranged by an insolvency practitioner (IP), who works with the debtor to create a repayment plan that’s affordable and acceptable to creditors. The debtor makes regular payments to the IP, who distributes the money to creditors. After the agreed period, any remaining unpaid debt is usually written off.
Key benefits of an IVA include:
Debt Consolidation: Combine multiple debts into one manageable monthly payment.
Legal Protection: Creditors cannot take legal action against the debtor once the IVA is approved.
Fixed Term: Most IVAs last five to six years, providing a clear end date to debt repayments.
Interest and Charges Frozen: Once an IVA is agreed upon, interest and charges on the debts are typically frozen.
However, an IVA also has its downsides:
Impact on Credit Rating: An IVA will negatively affect the debtor’s credit rating for six years.
Homeowner Risks: Homeowners may need to release equity from their property to pay off debts.
Strict Adherence: Missing IVA payments can result in the arrangement failing, potentially leading to bankruptcy.
Overall, an IVA can provide a structured, supportive way for individuals to manage and eventually overcome their debt. It’s important for those considering an IVA to seek advice from a qualified insolvency practitioner to understand the full implications and determine if it’s the right option for their financial situation.
